EDI: Internet revolutionizes EDI - electronic data interchange

Discount Store News, May 24, 1999

A buyer sits down at her desk, ready to purchase goods from abroad. Instead of picking up the telephone or sending a fax, she issues a request for a price quote through a Web site. Not long afterward, she receives a reply and executes an order with the click of a mouse.

As this scenario illustrates, the Internet has begun to revolutionize the supply chain. Industry players are recognizing that using cyberspace rather than traditional communication methods to exchange data about orders, inventory levels, sales trends, shipping/receiving times, item forecasting and the like can yield cost reduction, better customer service, streamlined delivery and access to a broader retailer/ supplier community.

Consequently, these players are fast embracing Web-based electronic data interchange (EDI). Extranets, or private networks that utilize Internet technology, have gained considerable ground, as well.

While many major vendors and retailers have had EDI in place for quite some time, the Internet empowers smaller concerns that could not finance the programming inherent in supporting electronic documents or the services of value-added networks (VANs) through which the data is transmitted. "The beauty of the Internet is that it takes a company's size out of the equation," says Karen Norman, a manager at Tastee Apple Inc., Newcomers-town, Ohio. Tastee Apple manufactures apple cider, apple chips and caramel apples for Sam's Clubs, Bentonville, Ark., and a number of other warehouse companies.

Like a majority of newcomers to Internet EDI, Tastee Apple receives electronic purchase orders and sends invoices through a third-party firm. The purchase orders are downloaded to The EC Company, Palo Alto, Calif., whose EC Exchange software translates orders into a format that Norman can read. Invoice templates that are formatted by EC to suit the requirements of each Tastee Apple customer reside on Norman's computer. Once billing information has been filled in, the manager uploads the invoices to EC through its EC Network for

translation and transmission to recipients.

EC charges $499 for the software plus $150 per template per trading partner and a monthly service fee. Norman deems the investment "well worth it." Payment of invoices has also become more prompt, she says.

Similarly, Albuquerque, N.M.-based paper producer McKinley Paper Co. this past winter commenced sending advance ship notices (ASN) to its accounts via PaperVan, a joint venture among VAN Intervan and Advanced EDI and Barcoding Corp., Pensacola, Fla. A home-grown program extracts shipment data from McKinley's Oracle database and e-mails it to PaperVan. Information is converted into X12, a standard EDI format, as well as into standards set by the American Forest and Paper Association, says Phyllis Davis-Minik, president, Advanced EDI and Barcoding Corp.

Steve Underwood, McKinley's customer service manager says the move has sparked a lot of goodwill among the company's customers and saves more than $2,000 per month on long distance calls previously placed to fax the ASN.

Indeed, the simplicity of Web-based EDI appears to be making converts of even those larger vendors that have previously shied away from it. Steve Vanechanos Jr., chief executive officer of DynamicWeb Enterprises Inc., Fairfield, N.J., cites giftware manufacturer Russ Berrie & Co. as a case in point. With a complete overhaul of the vendor's information technology infrastructure under way, management did not want to invest in a major EDI project, despite pressure from the mass market to do so, a spokesperson says. To satisfy all parties involved, DynamicWeb assisted Russ Berrie's programmers in configuring electronic documents containing ASNs, purchase order acknowledgment and invoice information. Documents are transmitted to DynamicWeb through proprietary lines, which turns them into true EDI messaging formats and routes them to trading partners.

"When you have 3,000 very complex receivables and a big technology upheaval, using the Internet for your communications is the only logical approach," the spokesperson says.

The Internet also is reinventing the supply chain by serving as a linchpin for a variety of creative approaches to facilitate collaboration among trading partners regardless of size or technological sophistication. Consider, for instance, the Burbank, Calif-based U.S. division of Nintendo. Several years ago, the company introduced an EDI-based product registration system that allows retailers to transmit through cyberspace the serial numbers of Nintendo merchandise sold in their stores, thereby slashing fraudulent return volumes.

"The solution was attractive to smaller retailers, but many saw it as too much of a financial burden," says Peter Junger director of field services at Nintendo. In mid-1998, the registry program was rendered Internet-enabled with Nintendo's adoption of IP.edi.link, a software solution offered by IPNet, Newport Beach, Calif. Warranty and other data scanned at the point of sale now moves through the IPNet application to Nintendo's new on-line registry.